SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number 0-27042
AlphaNet Solutions, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-2554535
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927
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(Address of Principal Executive Offices) (Zip Code)
(973) 267-0088
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(Registrant's Telephone Number
Including Area Code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: X No: ___
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Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of April 28, 2000:
Class Number of Shares Outstanding
- ----- ----------------------------
Common Stock, $.01 par value 6,338,193
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ALPHANET SOLUTIONS, INC.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...................................................................1
Consolidated Balance Sheets
as of March 31, 2000 (unaudited)
and December 31, 1999................................................................. 2
Consolidated Statements of Operations
for the Three Months Ended
March 31, 2000 (unaudited) and March 31, 1999 (unaudited)............................. 3
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 2000 (unaudited) and March 31, 1999 (unaudited)............................. 4
Notes to Consolidated Financial Statements (unaudited)................................ 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................14
PART II. OTHER INFORMATION.....................................................................15
Item 5. Other Information.....................................................................15
Item 6. Exhibits and Reports on Form 8-K......................................................15
SIGNATURES.................................................................................................16
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PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
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ALPHANET SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December 31,
2000 1999
---- ----
(unaudited)
ASSETS
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Current assets:
Cash and cash equivalents..................................... $ 21,854 $ 16,485
Accounts receivable, less allowance for doubtful
accounts of $3,289 at March 31, 2000 and December 31, 1999
16,976 26,700
Inventory.................................................... 4,204 2,533
Deferred income taxes........................................ 2,848 1,889
Prepaid expenses and other current assets.................... 1,412 1,234
Costs in excess of billings.................................. 1,583 481
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Total current assets.............................. 48,877 49,322
Property and equipment, net........................................... 4,428 4,459
Other assets.......................................................... 3,657 2,240
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Total assets...................................... $ 56,962 $ 56,021
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations................. $ 20 $ 20
Accounts payable............................................. 8,604 7,473
Accrued expenses............................................. 4,973 3,988
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Total current liabilities......................... 13,597 11,481
Advance from principal shareholder.................................... 675 675
Capital lease obligations............................................. 26 31
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Total liabilities................................ 14,298 12,187
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Shareholders' equity:
Preferred stock - $0.01 par value; authorized
3,000,000 shares, none issued.............................. - -
Common stock - $0.01 par value; authorized
15,000,000 shares, 6,463,832 and 6,423,399 shares
issued and outstanding at March 31, 2000 and
December 31, 1999, respectively............................ 64 64
Additional paid-in capital.................................... 34,333 34,150
Retained earnings............................................. 8,987 10,340
Treasury stock - at cost; 150,600 shares at March 31, 2000 and
December 31, 1999.......................................... (720) (720)
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Total shareholders' equity......................... 42,664 43,834
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Total liabilities and shareholders' equity.............................. $ 56,962 $ 56,021
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</TABLE>
See accompanying notes to consolidated financial statements.
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ALPHANET SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
For the Three Months Ended
March 31,
----------------------------
2000 1999
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Net sales:
Product........................................... $12,209 $18,692
Services and support.............................. 11,020 11,436
-------- ------
23,229 30,128
Cost of sales:
Product........................................... 11,338 16,609
Services and support.............................. 8,241 8,068
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19,579 24,677
Gross profit:
Product........................................... 871 2,083
Services and support.............................. 2,779 3,368
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3,650 5,451
Operating expenses:
Selling, general and administrative............... 5,617 6,302
Transition costs.................................. 275 -
-------- ------
5,892 6,302
Operating loss........................................... (2,242) (851)
Other income (expense):
Interest income, net.............................. 259 159
nex-i.com loss recognition (see note 3)........... (335) -
Other income, net................................. 6 90
--------- -------
(70) 249
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Loss before income taxes................................. (2,312) (602)
Benefit for income taxes................................. (959) (250)
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Net loss................................................. $ (1,353) $ (352)
========= =======
Net loss per share:
Basic............................................. $ (0.21) $(0.06)
========= =======
Diluted........................................... $ (0.21) $(0.06)
========= =======
Shares used to compute net loss per share:
Basic............................................. 6,299 6,236
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Diluted........................................... 6,299 6,236
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See accompanying notes to consolidated financial statements.
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ALPHANET SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Three Months Ended
March 31,
2000 1999
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Cash flows from operating activities:
Net loss ................................................................................ $ (1,353) $ (352)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ..................................................... 632 663
nex-i.com loss recognition (see note 3)............................................ 335 --
Deferred income taxes ............................................................. (959) --
Cash (used by) provided by changes in:
Accounts receivable.......................................................... 9,724 3,568
Inventories.................................................................. (1,671) (1,296)
Prepaid expenses and other current assets.................................... (178) 1,536
Other assets ................................................................ 5 2
Accounts payable............................................................. 1,131 (1,253)
Accrued expenses............................................................. 985 (401)
Costs in excess of billings.................................................. (1,102) (711)
-------- --------
Net cash provided by operating activities ......................................... 7,549 1,756
-------- --------
Cash flows from investing activities:
Property and equipment expenditures ..................................................... (558) (128)
Investment in nex-i.com ................................................................. (1,800) --
-------- --------
Net cash used in investing activities ............................................. (2,358) (128)
-------- --------
Cash flows from financing activities:
Net proceeds from sales of common stock ................................................. -- 63
Exercises of stock options .............................................................. 183 15
Repayment of capital lease obligations .................................................. (5) (4)
-------- --------
Net cash provided by financing activities ......................................... 178 74
-------- --------
Net increase in cash and cash equivalents .................................................... 5,369 1,702
Cash and cash equivalents, beginning of period ............................................... 16,485 13,377
-------- --------
Cash and cash equivalents, end of period ..................................................... $ 21,854 $ 15,079
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</TABLE>
See accompanying notes to consolidated financial statements.
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ALPHANET SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Description of the Business and Basis of Presentation:
AlphaNet Solutions, Inc. (the "Company") is an information technology
professional services firm specializing in network design, operation,
management, and security. The Company provides services in information security,
network implementation, professional development, project management, and
Internet-related matters.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
periods. The foregoing financial information reflects all adjustments which are,
in the opinion of management, necessary for a fair presentation of the Company's
financial position, results of operations and cash flows as of the dates and for
the periods presented. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated
financial statements should be read in conjunction with the Company's audited
financial statements for the year ended December 31, 1999, which were included
as part of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission. Certain prior year amounts have been
reclassified to conform with current year presentation.
Results for the interim periods are not necessarily indicative of results
that may be expected for the entire year.
Note 2 - Net Income Per Share:
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COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
(unaudited)
For the Three Months Ended
March 31,
2000 1999
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Net loss................................................................ $ (1,353) $ (352)
========== ==========
Basic:
Weighted average number of shares outstanding........................ 6,299 6,236
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Net loss per share................................................... $ (0.21) $ (0.06)
========== ===========
Diluted:
Weighted average number of shares outstanding........................ 6,299 6,236
Dilutive effects of stock options.................................... -- --
---------- -----------
Weighted average number of common and
equivalent shares outstanding .................................. 6,299 6,236
---------- -----------
Net loss per share................................................... $ (0.21) $ (0.06)
========== ===========
</TABLE>
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Options to purchase 769,165 shares and 511,870 shares of the Company's
common stock at weighted average exercise prices of $4.41 and $5.19 per share as
of March 31, 2000 and 1999, respectively, were excluded from the calculations of
diluted earnings per share as their effect would be anti-dilutive.
Note 3 - Investment in nex-i.com:
On January 14, 2000, the Company made an investment of $1.8 million for
3,101,000 shares of Series A Convertible Participating Preferred Stock in a
privately-held internet company - nex-i.com Inc. ("nex-i.com"). The investment
represents approximately 30% of nex-i.com equity on an as converted basis. The
Company has recorded a charge to the extent of its investment based upon its
proportionate preferred stock funding interest which is currently 78%.
The Company has entered into a strategic relationship with nex-i.com
which provides the Company with a right of first refusal to perform certain
services related to nex-i.com's customers which are routinely performed by the
Company for its own clients. The terms of the preferred stock investment
include, among other provisions, Board of Directors representation for the
Company and the right (with certain restrictions) to sell the shares back to
nex-i.com after January 14, 2006, subject to acceleration under certain
circumstances. Additionally, the Company has agreed, subject to shareholder
approval at the Company's 2000 Annual Meeting of Shareholders scheduled for May
19, 2000, or any adjournment thereof, to issue 200,000 common stock purchase
warrants to Fallen Angel Capital, LLC in consideration for investment advisory
services provided to the Company in connection with its preferred stock
investment in nex-i.com.
Note 4 - Recently Issued Accounting Standards:
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial
Statements". This SAB summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. As amended by SAB 101A, this SAB must be implemented no later than
June 30, 2000. The Company does not expect the accounting and disclosures
discussed in SAB 101 to have a material impact on its financial statements.
Note 5 - Transition Costs:
Transition Costs of $275,000 for the first quarter of 2000 include costs
to realign the Company's workforce and improve its recruiting and information
technology infrastructure.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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General
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AlphaNet Solutions, Inc. ("AlphaNet Solutions" or the "Company") is an
information technology ("IT") professional services firm specializing in network
design, operation, management, and security. Through its Enterprise Network
Management Division, the Company also offers remote network management, call
center support, and managed security services. The Company's customers are
primarily Fortune 1000 and other large and mid-sized companies located in the
New York-to-Philadelphia corridor. The Company was formed in 1984 as an
authorized reseller of computer hardware and software product and, since 1990,
has been developing and offering related IT services. In the first quarter of
2000, net product sales were 52.6% and services and support revenue was 47.4% of
the Company's net sales. During the same period, gross profit from product sales
was 23.9% and gross profit from services and support revenue was 76.1% of the
Company's total gross profit.
During the first quarter of 2000, the Company's total net sales decreased
by 22.9% from the comparable period in 1999. This decline was primarily
attributable to a reduction in product sales of $6.5 million and services
revenue of $416,000. The Company continues to focus on the strategy of
transitioning from primarily a reseller of product to a professional services
Company. See "Results of Operations" on pages 11-12.
The Company is authorized by many leading manufacturers of IT products,
such as 3Com, Cisco Systems, Compaq, Hewlett-Packard, IBM, Intel, Lucent
Technologies, Microsoft, NEC, Nortel Networks, Novell and Sun Microsystems to
resell their products and provide related services. Such products include
workstations, servers, networking and communications equipment, enterprise
computing products, and application software. Through its established vendor
alliances with major aggregators of computer hardware and software, Ingram
Micro, Inc. ("Ingram"), Pinacor, Inc., an affiliate of MicroAge, Inc.
("Pinacor"), and Tech Data Corporation ("Tech Data"), the Company provides its
customers with competitive pricing and such value-added services as electronic
product ordering, product configuration, testing, warehousing and delivery. The
Company's relationship with Pinacor commenced in 1984 and, as customer demand
for IT products grew, the Company initiated its relationships with Ingram and
Tech Data in 1994. In general, the Company orders IT products, including
workstations, servers, enterprise computing products, networking and
communications equipment, and application software from such aggregators on an
as-needed basis, thereby reducing the Company's need to carry large inventories.
During the three months ended March 31, 2000, the Company acquired approximately
48.9%, 3.6% and 21.3% of its products for resale from Ingram, Pinacor and Tech
Data, respectively.
Except for the MTA Contract entered into in December 1997, there are no
ongoing written commitments by customers to purchase products from the Company,
and all product sales are made on a purchase-order basis. As the market for IT
products has matured, price competition has intensified and is likely to
continue to intensify. During the three months ended March 31, 2000, the
Company's gross profits, margins and results of operations were adversely
affected by such continued product pricing pressure and by a significant
reduction in product purchase orders from the Company's customers. In addition,
the Company's gross profits, margins and results of operations could be
adversely affected by a disruption in the Company's sources of product supply.
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The Company offers enterprise network management, information security,
Internet-related, eMobile Solutions, application development, professional
development, help desk, and workstation support services. Services and support
revenue is recognized as such services are performed. Most of the Company's
services are billed on a time-and-materials basis. The Company's professional
development and services are fee-based on a per-course basis. Generally, the
Company's service arrangements with its customers may be terminated by such
customers with limited advance notice and without significant penalty. The most
significant cost relating to the services component of the Company's business is
personnel costs which consist of salaries, benefits and payroll-related
expenses. Thus, the financial performance of the Company's service business is
based primarily upon billing margins (billable hourly rates less the costs to
the Company of such service personnel on an hourly basis) and utilization rates
(billable hours divided by paid hours). The future success of the services
component of the Company's business will depend in large part upon its ability
to maintain high utilization rates at profitable billing margins and to attract
and retain these personnel. The competition for quality technical personnel has
continued to intensify resulting in increased personnel costs for the Company
and many other IT service providers. This intense competition has caused the
Company's billing margins to be lower than they might otherwise have been.
The Company may receive manufacturer rebates resulting from equipment
sales. In addition, the Company receives volume discounts and other incentives
from certain of its suppliers. Except for products in transit or products
awaiting configuration at a Company facility, the Company generally does not
maintain large inventory balances. The Company's primary vendors have announced
or instituted changes in their price protection and inventory management
programs as a direct result of changes in such policies by manufacturers.
Specifically, they have announced that they will (i) limit price protection to
that provided by the manufacturer, generally less than 30 days, rather than the
unlimited protection previously available; and (ii) restrict product returns,
other than defective returns, to a percentage (the percentage varies depending
on the vendor and when the return is made) of product purchased, during a
defined period, at the lower of the invoiced price or the current price, subject
to the specific manufacturer's requirements and restrictions. At the present
time, the Company does not believe these changes in the vendor policies will
have a material impact on its business. Other than changes in such price
protection and return policies, the Company is unaware that any of its suppliers
or manufacturers have changed or intend to further change these programs. There
can be no assurances that any such rebates, discounts or incentives will
continue at historical levels, if at all. Further adverse modification,
restriction or reduction in such programs could have a material adverse effect
on the Company's financial position, results of operations, and cash flows.
The Company believes that its ability to provide a broad range of
technical services, coupled with its traditional strength in satisfying its
customers' IT product requirements and its long-term relationships with large
clients, positions the Company to grow the services component of its business.
As such, the Company anticipates that an increasing percentage of its gross
profits in the future will be derived from the services and support component of
its business. During the three months ended March 31, 2000, services revenue
accounted for approximately 76.1% of the Company's total gross profit in this
period. The Company believes that, as a single-source provider of IT products,
services and support, it is able to earn margins higher than it would earn if it
sold products only.
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The Company's net sales, gross profit, operating income and net income have
varied substantially from quarter to quarter and are expected to continue to do
so in the future. Many factors, some of which are not within the Company's
control, have contributed and may in the future contribute to fluctuations in
operating results. These factors include: the short-term nature of the Company's
customers' commitments; patterns of capital spending by customers; the timing,
size, and mix of product and service orders and deliveries; the timing and size
of new projects; pricing changes in response to various competitive factors;
market factors affecting the availability of qualified technical personnel;
timing and customer acceptance of new product and service offerings; changes in
trends affecting outsourcing of IT services; disruption in sources of supply;
changes in product, personnel, and other operating costs; and industry and
general economic conditions. Operating results have been and may in the future
also be affected by the cost, timing and other effects of acquisitions,
including the mix of revenues of acquired companies. The Company believes,
therefore, that past operating results and period-to-period comparisons should
not be relied upon as an indication of future operating performance.
The Company's operating results have been and will continue to be impacted
by changes in technical personnel billing and utilization rates. Many of the
Company's costs, particularly costs associated with services and support
revenue, such as administrative support personnel and facilities costs, are
primarily fixed costs. The Company's expense levels are based in part on
expectations of future revenues. Technical personnel utilization rates have been
and are expected to continue to be adversely affected during periods of rapid
and concentrated hiring. Depending upon the availability of qualified technical
personnel, during periods of rapid growth the Company has utilized and in the
future is likely to utilize contract personnel, which adversely affects gross
margins. If the Company successfully expands its service offerings, periods of
variability in utilization may continue to occur. In addition, the Company is
likely to incur greater technical training costs during such periods.
In December 1997, the Company entered into a four-year, $20.4 million
contract with the MTA to furnish and install local and wide-area computer
network components including network and telecommunications hardware, software
and cabling throughout the MTA's over 200 locations. The aggregate amount of
this contract was subsequently increased to $20.6 million. The Company is the
prime contractor on this project and is responsible for project management,
systems procurement, and installation. The work is grouped in contiguous
locations and payment is predicated upon achieving specific milestone events. In
the event of default, in addition to all other remedies at law, the MTA reserves
the right to terminate the services of the Company and complete the MTA Contract
itself at the Company's cost. In the event of unexcused delay by the Company,
the Company may be obligated to pay, as liquidated damages, the sum of $100 to
$200 per day. While the Company is currently performing in accordance with the
contract terms, there can be no assurance that any such events of default or
unexcused delays would not occur. In addition, the MTA Contract is a fixed unit
price contract, and the quantities are approximate, for which the MTA has
expressly reserved the right, for each item, to direct the amount of equipment
be increased, decreased, or omitted entirely on 30 days notice. The MTA has the
right to suspend the work on 10 days notice for up to 90 days and/or terminate
the contract, at any time, on notice, paying only for the work performed to the
date of termination. The project is subject to the prevailing wage rate and
classification for telecommunications workers, managed by the New York City
Controller's office, over which the Company has no control, and which is
generally adjusted in June of each year and may be so adjusted in the future.
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The Company has performed services and supplied products to the MTA since
the inception of the MTA Contract. The work performed to date at MTA sites has
required greater than originally estimated labor and other costs to complete. In
May 1999, the Company submitted a formal request to the MTA for equitable
adjustment in the amount of approximately $1.5 million and for a time extension.
This request was supplemented with a further submission in October 1999. In
January 2000, the Project Manager for the MTA Contract denied the Company's
request, thereby triggering the Company's right under the contract to appeal the
Project Manager's denial to the MTA's Dispute Resolution Office (the "DRO"). The
Company filed its Notice of Appeal with the DRO in February 2000, and pursuant
to the DRO's request, filed a further written submission with the DRO on March
23, 2000. It is not yet known when or how the DRO will rule on the Company's
appeal. Under the terms of the MTA Contract, the Company is entitled to appeal
any adverse determination of the DRO to the trial-level court in the State of
New York. The Company believes that its request for equitable adjustment
constitutes a valid claim under the MTA Contract. There can be no assurance the
MTA will approve, either in whole or in part, any equitable adjustment in the
contract amount or terms requested by the Company. The Company has initiated
actions to improve the operating efficiencies and management of this project. No
amounts have been recognized for any relief which may be realized from the claim
for equitable adjustment submitted to the MTA. The Company is currently
recording recording revenues under the MTA Contract equal to costs incurred. At
March 31, 2000, based upon eligible drawdowns, the MTA project was approximately
47% complete.
Forward-Looking Statements
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Certain statements are included in this Quarterly Report on Form 10-Q
which are not historical and are "forward-looking," and may be identified by
such terms as "expect," "believe," "may," "will," and "intend" or similar terms.
These forward-looking statements may include, without limitation, statements
regarding the anticipated growth in the IT markets, the continuation of the
trends favoring outsourcing of management information systems ("MIS") functions
by large and mid-sized companies, the anticipated growth and higher margins in
the services and support component of our business, the timing of the
development and implementation of AlphaNet Solutions' new service offerings and
the utilization of such services by our customers, and trends in future
operating performance, and are forward-looking statements within the meaning of
The Private Securities Litigation Reform Act of 1995. Such forward-looking
statements include risks and uncertainties, including, but not limited to: (i)
the substantial variability of our quarterly operating results caused by a
variety of factors, some of which are not within our control, including (a) the
short-term nature of our customers' commitments, (b) patterns of capital
spending by our customers, (c) the timing, size and mix of product and service
orders and deliveries, (d) the timing and size of new projects, (e) pricing
changes in response to various competitive factors, (f) market factors affecting
the availability of qualified technical personnel, (g) the timing and customer
acceptance of new product and service offerings, (h) changes in trends affecting
outsourcing of IT services, (i) disruption in sources of supply, (j) changes in
product, personnel and other operating costs, and (k) industry and general
economic conditions; (ii) changes in technical personnel billing and utilization
rates which are likely to be adversely affected during periods of rapid and
concentrated hiring; (iii) the intense competition in the markets for our
products and services; (iv) our ability to effectively manage our growth which
will require us to continue developing and improving our operational, financial
and other internal systems; (v) the ability to develop, market, provide, and
achieve market acceptance of new service offerings to new and existing
customers; (vi) our ability to attract, hire, train, and retain qualified
technical personnel in an increasingly competitive market; (vii) our substantial
reliance on a concentrated number of key customers; (viii) uncertainties
relating to potential acquisitions, if any, made by AlphaNet Solutions, such as
our ability to integrate acquired operations and to retain key customers and
personnel of the acquired business; and (ix) our reliance on the continued
services of key executive officers and salespersons. Such risks and
uncertainties may cause our actual results to differ materially from the results
discussed in the forward-looking statements contained herein.
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Results of Operations
- ---------------------
Three Months Ended March 31, 2000 Compared To Three Months Ended March 31, 1999
Net Sales. Net sales decreased by 22.9%, or $6.9 million, to $23.2
million for the first quarter of 2000 from $30.1 million for the first quarter
of 1999. The Company has continued to focus on the strategy of transitioning
AlphaNet Solutions from primarily a reseller of product to a professional
services company. As a result of this transition, product sales decreased by
34.7%, or $6.5 million, to $12.2 million for the first quarter of 2000 from
$18.7 million for the first quarter of 1999. Services and support revenue
decreased by 3.6%, or $416,000, to $11.0 million for the first quarter of 2000
from $11.4 million for the first quarter of 1999. Many of the services performed
by the Company in prior years such as desktop support services, configuration
and installation were performed to support the product sales. As the overall
product business declines, this type of service revenue also declines. The
Company is now focusing on providing services and support that are independent
of product sales such as security, training, and network operations support.
Also contributing to reduced services and support revenue for the first quarter
of 2000 is a general slowdown in IT spending as Y2K projects were completed.
Gross Profit. Gross profit decreased by 33.0%, or $1.8 million, to $3.7
million for the first quarter of 2000 from $5.5 million for the first quarter of
1999. Measured as a percentage of net sales, the Company's overall gross profit
margin decreased to 15.7% of net sales for the first quarter of 2000 from 18.1%
for the first quarter of 1999. Gross profit attributable to product sales
decreased by 58.2%, or $1.2 million, to $871,000 for the first quarter of 2000
from $2.1 million for the first quarter of 1999. Measured as a percentage of net
sales, product gross profit decreased to 7.1% for the first quarter of 2000 from
11.1% for the first quarter of 1999. This decline in product gross profit is
primarily due to downward pricing pressure on product sales. Gross profit
attributable to services and support decreased by 17.5%, or $589,000, to $2.8
million in the first quarter of 2000 from $3.4 million for the first quarter of
1999. Measured as a percentage of net sales, gross profit from services and
support decreased to 25.2% for the first quarter of 2000 from 29.5% for the
first quarter of 1999. This decrease is primarily due to the loss of gross
profit from the Company's discontinued staffing division and telecom division
and a reduction in manufacturer credits received for warranty repairs performed
by the Company.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by 10.9%, or $685,000, to $5.6 million for the
first quarter of 2000 from $6.3 million for the first quarter of 1999. This
decrease is primarily attributable to reduced personnel and facilities related
costs partially offset by increased marketing and advertising expenditures,
increased recruiting costs for technical personnel, and increased professional
services costs.
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<PAGE>
Transition costs. Transition costs of $275,000 for the first quarter of
2000 include costs to realign the Company's workforce and improve its recruiting
and information technology infrastructure.
Interest income, net. Interest income, net increased by 62.9%, or
$100,000, to $259,000 for the first quarter of 2000 from $159,000 in the first
quarter of 1999. This increase is primarily due to a $4.9 million increase in
the average cash balance maintained by the Company during the current quarter.
nex-i.com. On January 14, 2000, the Company made an investment of $1.8
million for 3,101,000 shares of Series A Convertible Participating Preferred
Stock in a private internet start-up - nex-i.com. The investment represents
approximately 30% of nex-i.com equity on an as converted basis. The nex-i.com
series A financing represents substantially all of the current funding available
to support nex-i.com's operations and cash flow requirements. Accordingly, the
Company has recorded a charge to the extent of its proportionate investment
based upon its preferred stock funding interest which is currently 78%. The
Company recorded a first quarter 2000 charge of $335,000 relating to this
investment.
Benefit for income taxes. The benefit for income taxes for the quarter
ended March 31, 2000 was $959,000. An income tax benefit was recorded at a 41.5%
effective tax rate in 2000. In 1999, the benefit for income taxes was $250,000,
which was also based upon a 41.5% effective tax rate.
Recently Issued Accounting Standards
- ------------------------------------
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial
Statements". This SAB summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. As amended by SAB 101A, this SAB must be implemented no later than
June 30, 2000. The Company does not expect the accounting and disclosures
discussed in SAB 101 to have a material impact on its financial statements.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents at March 31, 2000 increased by 32.6%, or $5.4
million, to $21.9 million from $16.5 million at December 31, 1999. Working
capital at March 31, 2000 was $35.3 million as compared to $37.8 million at
December 31, 1999 representing a decrease of $2.6 million or 6.8%. The increase
in cash was primarily due to increases in cash provided by operations of $7.5
million and cash provided by financing activities of $178,000 which is partially
offset by cash used in investing activities of $2.4 million.
Since its inception, the Company has funded its operations primarily from
cash generated by operations, as well as with funds from borrowings under the
Company's credit facilities and the net proceeds from the Company's public
offerings.
Cash provided by operating activities primarily resulted from collections
of accounts receivable of approximately $9.7 million, increases in accrued
expenses of $1.0 million, and increases in accounts payable of $1.1 million,
partially offset by a $1.7 million increase in inventory, costs in excess of
billings for the MTA project of $1.1 million and the net loss for the quarter of
$1.4 million. The Company's days sales outstanding in accounts receivable
decreased from 69 days at December 31, 1999 to 64 days at March 31, 2000.
Cash used in investing activities related to the Company's $1.8 million
investment in nex-i.com and capital expenditures of $558,000. The capital
expenditures were primarily for the purchase of computer equipment and software
used by the Company.
-12-
<PAGE>
Cash provided by financing activities of $178,000 primarily relates to
the proceeds from the exercise of employee stock options and employee purchases
of Company stock.
On June 30, 1997, the Company and the Bank executed a Loan and Security
Agreement whereby the Bank expanded the Company's credit facility to enable the
Company to borrow, based upon eligible accounts receivable, up to $15.0 million
for short-term working capital purposes. Such facility includes a $2.5 million
sublimit for letters of credit and a $5.0 million sublimit for acquisition
advances. Under the facility, the Company may borrow, subject to certain
post-closing conditions and covenants by the Company, (i) for working capital
purposes, at the Bank's prime rate less 0.50% or LIBOR plus 1.25% and (ii) for
acquisitions, at the Bank's prime rate less 0.25% or LIBOR plus 1.50%. The
Company's obligations under such facility are collateralized by a first priority
lien on the Company's accounts receivable and inventory, except for inventory
for which the Bank has or will have subordinated its position to certain other
lenders pursuant to intercreditor agreements. On September 30, 1998, the Company
and the Bank entered into an amendment to the aforementioned Loan and Security
Agreement, whereby the Bank extended the Company's credit facility for an
additional year through September 30, 1999. Effective October 1, 1999, the
Company and the Bank extended the Company's credit facility on substantially the
same terms and conditions for an interim period ending December 31, 1999.
Effective January 1, 2000, the Company and the Bank extended the Company's
credit facility for an additional year ending December 31, 2000 on substantially
similar terms; however, the Bank has provided $2.0 million of the $15.0 million
credit line to the Company on an uncollateralized basis. Under this credit
facility, the Company is required to maintain a minimum fixed charge coverage
ratio, and a total liabilities to net worth ratio. At March 31, 2000, no amounts
were outstanding under the credit facility.
The Company's Employee Stock Purchase Plan was approved by the Company's
shareholders in May 1998. During 1998, 80,888 shares of common stock were sold
to employees under the plan for approximately $509,000, an average price of
$6.29 per share. During 1999, employees purchased an additional 49,691 shares
under the plan for approximately $177,000, an average price of $3.54 per share.
During the three months ended March 31, 2000, 9,072 shares of common stock were
sold to employees under the plan for approximately $45,000, an average price of
$4.93 per share. The Company has issued an aggregate of 139,671 shares since the
inception of the Employee Stock Purchase Plan at an average price of $5.23 per
share, receiving total proceeds of $730,000.
The Company purchases certain inventory and equipment through financing
arrangements with Finova Capital Corporation and IBM Credit Corporation. At
March 31, 2000, there were outstanding balances of approximately $3.4 million
for Finova Capital Corporation and approximately $1.6 million for IBM Credit
Corporation under such arrangements. Obligations under such financing
arrangements are collateralized by substantially all of the assets of the
Company.
The Company believes that its available funds, together with existing and
anticipated credit facilities, will be adequate to satisfy its current and
planned operations for at least the next 12 months.
On April 27, 2000, the Company entered into a letter agreement with
Fallen Angel Capital, LLC, the general partner of Fallen Angel Equity Fund, LP.,
a Delaware limited partnership which owns more than 10% of the Company's common
stock and of which Ira Cohen, a director and nominee for re-election as a
director of the Company, is a principal. Under terms of the letter agreement,
the Company has agreed, subject to shareholder approval at the Company's Annual
Meeting of Shareholders scheduled for May 19, 2000, or any adjournment thereof,
to issue warrants to Fallen Angel Capital, LLC to purchase 200,000 shares of
Common Stock of the Company at a purchase price of $5.00 per share for a
one-year period commencing May 19, 2000 and ending May 18, 2001. The
consideration for the issuance of the warrants is the services provided by
Fallen Angel Capital, LLC in negotiating the business and financial terms of the
Company's preferred stock investment in nex-i.com Inc., a New Jersey
corporation. The estimated fair value of the warrants will be determined as of
the date of shareholder approval using the Black-Scholes option pricing model.
-13-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
- ------- -----------------------------------------------------------
Not applicable.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
- ------- ------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibit.
10.36 Letter Agreement dated April 27, 2000 by and between Fallen
Angel Capital, LLC ("Fallen Angel") and AlphaNet Solutions,
Inc. concerning the issuance of Common Stock purchase
warrants to Fallen Angel.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report on Form 10-Q is filed.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AlphaNet Solutions, Inc.
DATE: May 12, 2000 By: DONALD A. DEIESO
---------------------------------------------
Donald A. Deieso
President and Chief Executive Officer
(Principal Executive Officer)
DATE: May 12, 2000 By: WILLIAM S. MEDVE
---------------------------------------------
William S. Medve
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
-16-
ALPHANET SOLUTIONS, INC.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
April 27, 2000
Fallen Angel Capital, LLC
960 Holmdel Road
Holmdel, New Jersey
AlphaNet Solutions, Inc. (the "Company") is a New Jersey corporation.
Fallen Angel Equity Fund, L.P. (the "Partnership") is a Delaware limited
partnership. The general partner of the Partnership is Fallen Angel Capital,
LLC, a Delaware limited liability company (the "General Partner"). Stan Gang is
a shareholder of the Company and joins in this agreement, as shown on the last
page hereof, solely with respect to the confirmation of his intention to vote in
favor of the Company's proposal to issue certain warrants, as set forth herein,
and Mr. Gang is not in any way bound by any of the terms, conditions, covenants
or other agreements set forth herein.
On May 20, 1999, the Company's Board of Directors authorized the
issuance of warrants to Fallen Angel to purchase Common Stock of the Company,
subject to agreement on the terms of the warrants and the terms of issuance
thereof. The warrants were to entitle the General Partner to purchase 200,000
shares of Common Stock of the Company at a purchase price of $5.00 per share,
which, on the date of approval thereof by the Board of Directors of the Company,
was approximately 125% of the $3.938 closing price of the Common Stock.
The consideration for the issuance of the warrants is the services
provided by the General Partner in negotiating the business and financial terms
of the Company's preferred stock investment in nex-i.com inc., a New Jersey
corporation. The issuance of the warrants for this purpose is being submitted
for approval by the Company's shareholders at the Company's 2000 Annual Meeting
currently scheduled for May 19, 2000.
As consideration for the furnishing of the services described above,
the Company will issue, and the General Partner will accept therefor, the
issuance by the Company of one or more warrants (each a "Warrant," together, the
"Warrants") to purchase an aggregate of 200,000 common shares of the Company
("Common Stock") as follows:
1. Upon approval by the Company's shareholders at the Company's 2000
Annual Meeting or any adjournment thereof, the Company shall promptly issue to
the General Partner a Warrant or Warrants in the form attached hereto to
purchase up to an aggregate of 200,000 shares of Common Stock, for a term of one
year, at $5.00 per share.
2. At any time after delivery of the Warrants to the General Partner
(the "Grant Date") until the earlier of (i) one day prior to the third
anniversary of the Grant Date, and (ii) 90 days prior to the date on which all
the shares issuable upon the exercise of the Warrants (the "Warrant Shares") may
be immediately sold without registration pursuant to Rule 144(k) of the
Securities Act of 1933, as amended, without being subject to volume limitations
thereof, the holders of no less than 60% of the Warrant Shares, may request the
Company to file a Registration Statement with the SEC registering the Warrant
Shares for resale (a "Registration Request"). In the event that a Registration
Request is made to the Company, the Company shall promptly and diligently pursue
the filing of a Registration Statement with the SEC, provided, that: (i) holders
of the Warrants shall excuse any delay in the filing of such Registration
Statement for so long as the Company, in good faith, determines that the
disclosure required in the Registration Statement would constitute a premature
disclosure of confidential information that would have an adverse affect on the
Company's ability to transact business at such time; and (ii) if the Company is
eligible to file a Registration Statement on Form S-3, or a similar Form, the
Company may file such Registration Statement on such form. The Company shall at
all times, and at its sole discretion, have the right to include the Warrant
Shares in any Registration Statement that the Company files with the SEC. The
Company shall maintain the effectiveness of any Registration Statement filed by
it pursuant to a Registration Request for a period of 270 days after the
effective date thereof.
In the event that the Company prepares and files a Registration
Statement pursuant to a Registration Request, all reasonable expenses incurred
in connection therewith, including, without limitation, all underwriting
discounts and commissions, registration, listing and qualification fees, printer
and accounting fees, all fees and disbursements of counsel for the Company and
all other outside costs, shall be borne by the General Partner; provided, that
the General Partner shall not be required to pay for any allocated internal
staff costs incurred by the Company in connection with the preparation and
filing of such Registration Statement.
Upon the exercise of the Warrants, the Company shall list the Warrant
Shares on the Nasdaq National Market System or such other market or exchange on
which the Common Stock is listed at such time. The Company agrees that until the
holders sell all the Warrant Shares, the Company will file on or before the
required date therefor all regular or periodic reports (pursuant to the
Securities Exchange Act of 1934) with the Securities and Exchange Commission
(the "SEC") and will deliver to the holders promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the Company
to its stockholders generally, and of each regular or periodic report (pursuant
to the Securities Exchange Act of 1934) and any Registration Statement,
prospectus or written communication (other than transmittal letters) (pursuant
to the Securities Act of 1933), filed by the Company with (i) the SEC or (ii)
any securities exchange on which shares of Common stock are listed.
In the event that Warrant Shares are to be sold pursuant to a
Registration Statement filed by the Company pursuant to a Registration Request
is to be an underwritten offering, the Company shall enter into and perform its
obligations under an underwriting agreement in usual and customary form
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering.
In the event any Warrant Shares are included in a Registration
Statement filed by the Company pursuant to a Registration Request:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each holder of Warrant Shares, each of its
directors, officers, partners, managers, employees and agents, and any other
person who controls such holder within the meaning of the Securities Act of 1933
(each, an "Indemnified Holder"), against any losses, claims, damages, expenses
or liabilities (joint or several) (collectively "Claims") to which any of them
become subject under the Securities Act of 1933, the Securities Exchange Act of
1934 or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act of 1933, the
Securities Exchange Act of 1934 or any state securities law or any rule or
regulation (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). The Company shall reimburse the Indemnified
Holders, promptly as such expenses are incurred and are due and payable, for the
legal fees of one such Indemnified Holder as to any Claim or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this paragraph: (A) shall not apply to a
Claim by any Indemnified Holder arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Holder expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
for review by the Indemnified Holder (B) with respect to any preliminary
prospectus shall not inure to the benefit of any person from whom the person
asserting any such Claim purchased the Warrant Shares that are the subject
thereof (or to the benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if a
prospectus was timely made available by the Company for review by the
Indemnified Holder or such person; and (C) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Holder and shall survive the transfer of
the Warrant Shares by the Indemnified Holder.
(b) In connection with any Registration Statement in which
Warrant Shares of a holder are included, each such holder agrees to indemnify
and hold harmless, to the same extent and in the same manner set forth in the
preceding paragraph, the Company, each of its directors, each of its officers
who sign the Registration Statement, each person, if any, who controls the
Company within the meaning of the Securities Act of 1933 or the Securities
Exchange Act of 1934, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934
(each, an "Indemnified Party"), against any Claim to which any of them may
become subject, under the Securities Act of 1933, the Securities Exchange Act of
1934 or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such holder expressly for use in connection with
such Registration Statement, and such holder will promptly reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this paragraph shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
holder, which consent shall not be unreasonably withheld; provided further,
however, that the holder shall be liable under this paragraph for only that
amount of a Claim as does not exceed the net proceeds to such holder as a result
of the sale of the Warrant Shares included in such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Warrant Shares by the holder. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this paragraph with
respect to any preliminary prospectus shall not inure to the benefit of an
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
3. In connection with the furnishing of services by the General
Partner to the Company, information concerning the Company including its
subsidiaries and affiliates, which may have been and may be in verbal, visual,
written, electronic, or other form ("Evaluation Material"), was made available
to the General Partner. The Evaluation Material does not include information
which was rightfully in the possession of the General Partner prior to
disclosure by the Company, was independently developed by the General Partner
without use of any Evaluation Material, or is now or hereafter becomes available
to the public other than as a result of a disclosure by the General Partner in
violation of this Agreement. The General Partner represents that it has used the
Evaluation Material solely in connection with providing services to the Company,
and shall keep such Evaluation Material strictly confidential. The Evaluation
Material was provided by the General Partner solely to those of its
representatives to whom such disclosure was reasonably deemed to be required to
facilitate the General Partner's furnishing of services to the Company. The
General Partner acknowledges to the Company that the Evaluation Material may
contain material nonpublic information concerning the Company. The General
Partner acknowledges its awareness of the restrictions imposed by federal and
state securities laws on persons in possession of material nonpublic information
and hereby agrees that while it is in possession of material nonpublic
information with respect to the Company, the General Partner has not purchased,
and shall not purchase, and has not permitted and shall not permit the
Partnership, to purchase or sell any securities of the Company, other than
purchases pursuant to the exercise of the Warrants, or to communicate such
information to any third party in violation of such laws. Nothing herein shall
constitute an admission by the General Partner or the Partnership that any of
the Evaluation Material in fact contains material nonpublic information
concerning the Company.
4. The holder of the Warrants or any Warrant Shares may, at any time
and from time to time, without obtaining the prior consent or approval of the
Company, assign or otherwise transfer the Warrants or the Warrant Shares, or any
part thereof, and all or any part of such holder's rights under this Agreement,
provided that in connection with any assignment or transfer that is not
registered under the Securities Act of 1933, such holder must deliver a written
Opinion of Counsel, in form and substance satisfactory to the Company and from
Counsel that is satisfactory to the Company, to the Company no less than ten
calendar days prior to such proposed transfer, that (i) provides that the
proposed transfer is exempt from registration requirements under the Securities
Act of 1933 and (ii) sets forth the basis for such exemption.
5. The parties expressly acknowledge that issuance of the Warrant is
being submitted for approval of the Company's shareholders at the Company's 2000
Annual Meeting (currently scheduled for May 19, 2000), or any adjournment
thereof. Accordingly, the parties understand and agree that, unless and until
such approval has been secured, this Agreement shall have no force or effect.
<PAGE>
If the foregoing correctly sets forth our agreement with respect to the matter
set forth herein, please so indicate by executing two copies of this letter and
returning one executed copy to the Company, whereupon this letter shall
constitute our binding agreement with respect to the matters set forth herein.
ALPHANET SOLUTIONS, INC.
By: STAN GANG
------------------
Accepted and Agreed to as of the 26th day of Stan Gang
April, 2000
FALLEN ANGEL CAPITAL, L.L.C.
By: IRA COHEN
---------------
Ira Cohen
This is to confirm that I, Stan Gang, a shareholder of AlphaNet
Solutions, Inc. (the "Company"), am in favor of the proposal (the "Proposal")
submitted to the shareholders of the Company to issue certain warrants to Fallen
Angel Capital, L.L.C. ("Fallen Angel") and that I hereby commit to Fallen Angel
that I, as a shareholder of the Company, will vote all shares of the Company
that I own, or otherwise have the power to vote, in favor of the Proposal. I am
not bound by any of the provisions of the agreement set forth above this
paragraph.
STAN GANG
----------
Stan Gang
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited interim Consolidated Financial Statements as of March 31,
2000 contained in the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 2000 and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 21,854
<SECURITIES> 0
<RECEIVABLES> 20,265
<ALLOWANCES> 3,289
<INVENTORY> 4,204
<CURRENT-ASSETS> 48,877
<PP&E> 12,417
<DEPRECIATION> 7,989
<TOTAL-ASSETS> 56,962
<CURRENT-LIABILITIES> 13,597
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 42,600
<TOTAL-LIABILITY-AND-EQUITY> 56,962
<SALES> 23,229
<TOTAL-REVENUES> 23,229
<CGS> 19,579
<TOTAL-COSTS> 5,892
<OTHER-EXPENSES> 70
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,312)
<INCOME-TAX> (959)
<INCOME-CONTINUING> (1,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,353)
<EPS-BASIC> (0.21)<F1>
<EPS-DILUTED> (0.21)<F1>
<FN>
<F1>This amount is in accordance with Financial Accounting Standards Board
Statement No. 128
</FN>
</TABLE>
